An speculator who buys a fifty-year corporate bond
A) must be expecting to still be alive in fifty years.
B) is subject to substantial reinvestment risk.
C) is probably expecting market interest rates to increase in the future.
D) is probably expecting market interest rates to decrease in the future.

Question

Quizplus · Accepted Answer

Speculators who buy long-term bonds, like a fifty-year corporate bond, generally do so with the expectation that market interest rates will decrease in the future. When interest rates decrease, the value of existing bonds with higher interest rates increases, potentially allowing the speculator to sell the bond at a profit before maturity.

An Speculator Who Buys a Fifty-Year Corporate Bond